Options Trading Using Econometric Models

In the financial world, time series analysis is frequently used to predict stock prices, interest rates, and currency exchange rates. Econometric models are a type of time series analysis that uses historical data to forecast future asset prices and volatilities. Reference applied the autoregressive integrated moving average (ARIMA) model …

Profitability of a Dispersion Trading Strategy

Dispersion trading is an investment strategy that is used to capitalize on the discrepancies in volatilities between an index and its constituents. The strategy involves buying or selling the index options and simultaneously buying or selling the constituent stocks’ options. This results in a long/short volatility portfolio. Reference provided …

Technical Indicators in Momentum Trading

Technical indicators are mathematical calculations based on historic price, volume, or open interest information that aim to forecast future market behavior. In general, technical analysis focuses on trends and patterns in the price of an underlying instrument such as a stock or commodity. We recently discussed a paper that studied …

Technical Trading During The Pandemic

Many investors use fundamental or technical analysis when making investment decisions, with many only using technical analysis when picking their trades. Many traders use technical indicators to spot potential trading opportunities. Technical indicators are mathematical calculations based on the price, volume, or open interest of an underlying asset. They fall …

Option Pricing Model in Illiquid Markets

Black-Scholes-Merton (BSM) is an option pricing model for valuing European options. It was developed in the 1970s by Fisher Black, Myron Scholes, and Robert Merton, of whom two were awarded the Nobel Prize in Economic Sciences in 1997 for their work. The BSM model has become one of the most …

Debt/Equity Ratio: Calculator, Example

We have already covered the debt/equity ratio formula in detail before. However, you should also know what it is and how to use it. In this article, we will discuss this ratio with the help of concrete examples. What is the Debt/Equity Ratio? The debt/equity ratio compares the different elements …